DEPARTMENT OF THE TREASURY …

                             DEPARTMENT OF THE TREASURY
                                     INTERNAL REVENUE SERVICE
                                        WASHINGTON, DC 20224



  TAX EXEMPT AND
GOVERNMENT ENTITIES
     DIVISION                                                   SE:T:EO:E 06-2008

                                          July 28, 2008


      MEMORANDUM FOR ALL EO REVENUE AGENTS


      FROM:                   Marsha A. Ramirez /s/ Marsha A. Ramirez
                              Director, Exempt Organizations Examinations


      SUBJECT:                Political Campaign Activity on the Internet


      This directive relates to the examination of cases involving allegations of political
      activity on the Internet as part of the Political Activity Compliance Initiative (PACI).
      As such, it is to be incorporated in the IRM within the prescribed timelines.

      With the growth of the Internet, more cases have raised issues concerning whether
      a section 501(c)(3) organization has participated or intervened in a political
      campaign through its Internet activities, particularly through providing links to the
      Web sites of other organizations. Revenue Ruling 2007-41, 2007-25 I.R.B. 1421
      (June 18, 2007), provides guidance regarding political campaign activities in 21 fact
      situations, including three, Situations 19, 20, and 21, applying the law to an
      organization's use of its Internet Web site.

      Experience indicates that there are numerous cases involving potential political
      campaign intervention in the form of communications posted on Web sites operated
      by section 501(c)(3) organizations. Many of these communications include links to
      Web sites of other organizations. The analysis of cases involving links on a section
      501(c)(3) organization Web site involves determining whether material on a linked
      Web site is attributable to the section 501(c)(3) organization.

      There are several possible characterizations of such links. One suggests the link is
      akin to a referral from one source of information to another that the viewer can
      pursue or not pursue at his or her discretion. Another suggests the link is analogous
      to a distribution by the section 501(c)(3) organization of the information contained
      on the linked Web page. However, neither of these characterizations appropriately
      reflects the facts and circumstances in all cases, nor offers a single approach to
      resolving all such cases. As Revenue Ruling 2007-41 notes, the context for the link
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on the organization's Web site matters, as does the directness of the links between
the section 501(c)(3) organization's Web site and a Web page favoring or opposing
a candidate. The principles articulated in the revenue ruling are reinforced by work
on these cases which suggests that electronic proximity ­ including the number of
"clicks" that separate the objectionable material from the section 501(c)(3)
organization's Web site ­ is a significant consideration. To best employ resources in
this area, EO will distinguish between cases involving unrelated organizations and
those involving related organizations.

Cases Involving Links Between Unrelated Organizations
Where a case involves a link between a section 501(c)(3) organization's Web site
and the site of an unrelated organization (whether or not exempt), EO will pursue
the case if the facts and circumstances indicate that the section 501(c)(3)
organization is promoting, encouraging, recommending or otherwise urging viewers
to use the link to get information about specific candidates and their positions on
specific issues. Again, analysis of the context around the link is a key factor.
Further, where the facts and circumstances suggest that a section 501(c)(3)
organization is using a link between Web sites (other than a link to a related section
501(c)(4) organization, which is discussed below) to indirectly communicate a
message that could well be a violation of the law were it done directly, EO will
pursue the case.

Cases Involving Links Between Related Organizations
Additional considerations exist, however, in the case of related organizations.
Enforcement in this area requires EO to consider the implications of Taxation with
Representation of Washington, particularly Justice Blackmun's concurring opinion.
That opinion emphasizes the formal corporate separation between a section
501(c)(3) organization and its related section 501(c)(4) organization. Because this
added consideration can complicate the analysis in this area, EO will focus on
analyzing the context around a link in the unrelated organization cases, and not
pursue, at this time, cases involving a link between the Web site of a section
501(c)(3) organization and the home page of a Web site operated by a related
section 501(c)(4) organization.

In addition to the above scenarios, there are situations where a section 501(c)(3)
organization itself (1) takes a position on an issue, and (2) provides information
about candidate positions on the same issue, placing the organization at risk of
having intervened in a political campaign. The risk arises, and the case should be
pursued, even if the two elements are in separate parts of the organization's Web
site, or if one element is on the Web site and the other is not. Factors to be
considered in analyzing the connection between the elements include, but are not
limited to, timing, proximity and references between the elements.

All other cases involving possible political campaign intervention through use of the
Internet should be coordinated with the PACI Team. If you have any questions
please contact Vincent Fusco, PACI Team Leader at 216-520-7027.